Federal grants go to groups with shaky past

When Atlanta's old Empowerment Zone finally imploded in late 2001, the end came amid a spectacular flurry of federal audits, indictments and guilty pleas.

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The program was designed to inject $250 million in federal grants into some of the city's poorest neighborhoods to help promote the growth of local businesses and affordable housing. But it went off the rails from the start, with city overseers doling out easy money to well-connected applicants whose ability to deliver on ambitious projects would have seemed dubious to all but the most gullible loan officer.

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In the end, the zone's final executive director landed in prison on corruption charges, and a scathing audit revealed so much waste, graft and good old-fashioned bureaucratic incompetence that the Department of Housing and Urban Development threatened to withhold years of future funds from Atlanta. The city is still paying back $1.7 million in misused HUD grants.

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Six years later, the successor program to the Empowerment Zone continues to hand out federal dollars.

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The grants are administered by the Atlanta Coordinating Responsible Authority, or ACoRA, a stand-alone nonprofit corporation. Their recommendations must be approved by the city's finance department.

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And, again, there are questions as to whether some of the organizations set to receive grants are likely to be good stewards of public money.

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One grant applicant approved by ACoRA recently defaulted on a $1 million loan from the Atlanta Development Authority without making a single payment. Another group dropped the ball on a HUD-funded project, a failure that could end up costing city taxpayers up to $570,000. And a third organization had its $109,000 grant request approved even though its principal – well-known state Rep. "Able" Mable Thomas of Atlanta – sat on the very committee tasked with deciding who would receive grant money.

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In 2003, the city entrusted nearly $53 million in leftover Empowerment Zone funds to ACoRA. In the past two years, the nonprofit has given out about $31 million to community groups and local development projects, with $16 million left to be awarded; an additional $6 million will cover administrative costs.

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But the most recent grant recommendations, which total $1 million, have raised some eyebrows in the Vine City community.

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This past July, the Atlanta Development Authority finally foreclosed on a $1 million loan it made to the Vine City Health and Housing Ministry several years ago to buy and rehab a 44-unit apartment complex on Spencer Street, says Dawn Luke, the ADA's deputy director of housing finance.

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The ministry, which only succeeded in renting a handful of the apartments, quickly defaulted on the loan, she says. "If a project falls on hard times, we'll try to work with people," Luke explains. "But not one single payment was ever made."

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Because the property is so run-down and has no amenities, the apartments will likely be marketed as a tear-down for redevelopment so the agency can recoup some of its losses, she says.

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Yet, ACoRA plans to give the ministry $84,000 to cover administrative costs for a new, more ambitious development project for 16 single-family homes it plans to build in Vine City.

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ACoRA Director William McFarland explains that his group was aware that the ministry had defaulted on the ADA loan, but hopes "that this grant will help the organization improve its operational capacity and prevent future financial problems."

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In addition, McFarland says ACoRA had turned down a separate ministry loan request, but did not reveal the amount requested.

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Another grant, for $109,000, has been recommended for a group called the Greater Vine City Opportunities Program to help fund after-school programs for neighborhood children. The group's founder and director is Thomas, the Democratic state lawmaker who was also a member of the ACoRA grant evaluation committee.

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An ACoRA spokeswoman says Thomas recused herself from discussions and voting on her own organization.

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Linda Adams, a community activist in Vine City, says the lawmaker's organization should not have been selected because of the potential for a conflict of interest. "They shouldn't have chosen people with a financial interest in any of the projects," Adams says.

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Thomas could not be reached for comment.

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Among the latest round of grants is $129,000 earmarked for the English Avenue Community Development Corporation to help fund a neighborhood social-service center, provide home rehab assistance to seniors and for general operating costs.

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But that group has also had problems handling public money. In 2001, the city of Atlanta awarded the English Avenue CDC a $570,000 HUD grant to develop Proctor Village, a 35-unit townhouse complex. Last year, after several false starts and little visible progress, the city ruled the project to be in "noncompliance" with the terms of the grant.

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As a result, the city could be forced to pay back the grant money, says HUD spokesman Brian Sullivan. "Those grants are to be used to increase the pool of affordable housing," he says. "If there's a problem, we don't go after the subrecipient; we go after the recipient, which is the city."

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Terri Lee, director of the Atlanta Bureau of Housing, says the English Avenue CDC won't be considered for any future HUD grants until it makes good on Proctor Village. "It's not the position of the city to award additional money to groups in noncompliance," she says.

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Again, says McFarland, ACoRA knew about the failed project, yet wanted to help the group get its act together.

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"English Avenue needs a lot of help and the ACoRA board wants to help it obtain the resources to create the infrastructure required to help that neighborhood," he says.

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The challenge for grant-giving organizations is that many community-based groups applying for money are startups that don't have strong experience in development projects. Even the city's most visibly successful such group, the Historic District Development Corporation in the Old Fourth Ward, has experienced setbacks. Last year, it was forced to sell its high-profile Studioplex loft complex on Auburn Avenue.

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Sometimes encouragement pays off. ACoRA also has approved a $159,000 grant for the Tyler Place Community Development Corporation, a group that had built only 25 homes in Vine City over the past decade. This year, however, Tyler Place has teamed up with Brock Built Homes – a successful Westside development firm – on a $10 million project to build 53 townhouses.

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Company owner Steve Brock says he hopes to teach the community group the development ropes so it can use those skills to further benefit the neighborhood. "I haven't looked at their books, but they seem to be a good organization and this is one of the toughest parts of the city," he says. "I'm pleased to partner with them."

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